For 25 years, Nicolas Hayek has controlled the Swiss watch industry via his ownership of two companies making crucial watch parts. Now he’s shifting time again. Plus: a Q & A with Hayek

By Michael Clerizo

Swatch

Swatch Group chairman Nicolas Hayek with the “Jelly in Jelly” Swatch

You might imagine that Swatch has made a small fortune from the plastic watches it has been selling to global acclaim for close to 30 years. And you’d be right—but the story doesn’t end there. The modest-seeming Swatch brand is owned by Swatch Group, an industry powerhouse that has a hand in the manufacture of virtually every watch bearing the designation “Swiss.” Until eight years ago, the company’s 82-year-old chairman, billionaire Nicolas Hayek, was credited as the savior of the Swiss watch industry. In 2002, however, Hayek made a move that was either the mark of a far-sighted genius or a competition-crushing obsessive. Either way, Hayek made headlines around the world and brought unprecedented turmoil to the industry he loved.

The largest producer of watches on the planet, Hayek’s company is home to 19 brands, including Jaquet Droz, Hamilton and Omega, along with their colorful megastar, Swatch. The company’s birth in the early ’80s resulted from a Hayek-engineered merger of two struggling Swiss watchmaking giants, SSIH and ASUAG—part of a strategy aimed at preventing a Japanese takeover. Along with esteemed watch brands, ASUAG owned ETA, a renowned maker of movements, and Nivarox-FAR, the maker of components. (In automobile terms, ETA makes the chassis, wheels, axles and drive-shaft of a watch, Nivarox-FAR the engine.) It was this manufacturing stronghold that allowed Hayek to threaten Switzerland’s watchmaking industry when he made the 2002 decision to stop the supply of Swatch-made parts.

At Swatch Group headquarters, in the town of Biel/Bienne (90 minutes from Geneva), Hayek sits behind a cluttered desk in his public-swimming-pool-size corner office. Jacket off, tie loosened and wearing his customary two watches on each arm, Hayek pronounces: “You are not in the office of a man of business, you are in the studio of an artist.” It is a sumptuous space for an artist to work, but Swatch is a corporate world unlike any other—particularly considering the clinical culture of most Swiss watchmaking brands. Work attire here is casual, with the occasional appearance of retro-punks in red leather skirts or goths with black T-shirts and pierced eyebrows. Only visitors wear suits. Most watch brands strive to maintain a level of air quality in their facilities that astronauts on the International Space Station would envy, but, surprisingly, some employees smoke indoors. “This is private property. We can do what we like here,” says the company’s communications director. It appears to be a trickle-down directive. “I don’t work,” Hayek says. “I just amuse myself for eight to 14 hours a day.”

Click here for a timeline of Swatch Group

He should be amused. Forbes magazine ranks Hayek 232 on its 2010 list of the world’s billionaires, with assets valued at $3.9 billion. The Swatch Group—24,000 employees, subsidiaries in 37 countries and more than 500 standalone stores—is the basis of Hayek’s fortune. In 2009, 1.2 billion watches were produced globally, according to the best estimate of the Swiss Watch Industry Federation—559.4 million in China, 334.3 million in Hong Kong and 21.7 million in Switzerland. (If you are wondering about Japan, much of its output is now in China.) Also according to SWIF figures, the value of the average Chinese watch is $2, a Hong Kong watch is worth $11 and a Swiss watch $528. Nearly 500 years after watch production began in Switzerland, the rest of the world is still willing to pay a premium for its timepieces.

Born in Lebanon in 1928, Hayek studied science and mathematics in Beirut and France during the 1950s, and was, by 1979, a self-made man and the wealthy founder of Hayek Engineering AG, a prestigious consultancy firm involved in major reorganizations of AEG-Telefunken and Swiss Railways, when he was approached by a Swiss banker friend with a sensible, rational request: Would he prepare a report outlining how to sell SSIH and ASUAG to the Japanese? The mechanical-watch industry had withered under the blast of cheap Japanese quartz watches led by Citizen, Seiko and Casio; of the 90,000 jobs the Swiss industry supported a decade before, two-thirds had been lost. SSIH and ASUAG were on life support and when Seiko approached them with a tempting offer for Omega and other brands, the banks decided that watchmaking in Switzerland was doomed by high labor costs, and that the country should focus on pricey esoteric watches while surrendering the lower and middle ground to Asia. They were willing to see the Japanese take over Swiss production facilities and move everything to the Far East.

Hayek was outraged. He knew that if the Swiss lost ETA and Nivarox-FAR, the infrastructure of the industry would fall into the hands of competitors, not to mention that it would be the end of a centuries-old national symbol of culture and pride. “The watch industry of Switzerland sells, in fact, the message of the culture of Switzerland, of everything you have heard about: our chalets, our fields, our mountains,” Hayek says. “One day the president of a Japanese watch company in America said to me: ‘You cannot manufacture watches. Switzerland can make cheese but not watches. Why don’t you sell us Omega for 400 million francs?’ I told him ‘Only after I’m dead!’ ”

Rather than selling off the Swiss family silver, Hayek unveiled plans for merging the two conglomerates, then streamlining them and fighting the Japanese on their own turf—the inexpensive quartz watch. He is a persuasive man; the banks appointed him to a steering committee tasked with organizing the merger.

Comments (5 of 18)

Extremely cool Mr. Elliot. I'm starved for missives from the mailbox. I'll admit it, I even open junk mail. (Hey, maybe it's a check with a lot of zeros at the end.) Such a sad existence for me when my 1 a small rush of importance is ripping open junk mail. Bills can wait, so a real letter sounds excellent. Will subscribe.Cheers, Iris

So what is the alternative to Obama? McCain alettimddy doesn't know much about economics. Grrreattt! On the other hand Obama doesn't know that much either. In fact I think one could call him somewhat sheltered and ignorant but he appears to be able to change his position if evidence supports it.Did I mention that Obama didn't pander like Hillary and McCain did with the gas tax holiday.The thing that makes Obama the man for the job in my opinion is the color of his skin. I believe that the mere presence of a half white, half black man in the Presidency will do more to heal the racial divides in this country than a hundred years of public service announcements.A nation divided on racial lines as we are today in the U.S. can not compete as well as it could if it were united.Obama may be lacking in credentials for the job but his ability to motivate people to action makes that a non issue. Who would you rather have as a coach Obama or McCain?

2:58 pm September 1, 2012

Gilberto wrote:

She made Teresa, which was a big hit in 1989 and it's being remade right now with Angelique Boyer. She was also in El Callejf3n de los Milagros, which gertnad it was mostly big at the start between mexican movie fans only and only became big until she was famous. But she was well known here when she moved up to the states.

8:02 pm May 21, 2012

Joe Silva wrote:

@CFroze, I'll have to disagree and as I see it, more and more people are buying a watch, mostly, I would say, a Swiss watch as a fashion accessory, if you like, and less as a time keeping device.